The Australian dollar fell today on speculation that the Reserve Bank of Australia will cut its main interest rate as the European problems cause a negative impact on Australia’s economy.
The RBA holds a monetary policy meeting tomorrow and is expected to cut its main interest rate to 4 percent from the current 4.25 percent. Analysts think that the previous statements of the central bank were dovish enough to show willingness of the bank to ease the monetary policy. Moreover, it is not unlikely for the RBA to be dovish enough in its statement after tomorrow’s meeting to make market participants expect another cut, though it is not guaranteed.
Spain’s economy entered recession and other European countries may follow. That doesn’t help neither Australia’ economy nor the nation’s currency. The MSCI World Index of stocks dropped 0.4 percent, showing that investors weren’t willing to buy riskier assets today.
AUD/USD fell from 1.0456 to 1.0419 and AUD/JPY dropped from 83.93 to 83.24 as of 23:57 GMT today. EUR/AUD was up from 1.2655 to 1.2701.
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